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David Becker

Natural gas prices continued to break down on Thursday following the Department of Energy’s inventory report. The draw was larger than expected and the draw levels are now below the 5-year average for the first time in 13-months. According to a report from the National Oceanic Atmospheric Administration, the weather points to warmer than normal temperatures in most of the United States for the next weeks.

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Technical Analysis

Natural gas prices moved lower on Thursday, continuing to decline and poised to test support near the 50-day moving average at 2.73.  Resistance is seen near the 10-day moving average at 2.93. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Prices are oversold as the fast stochastic is printing a reading of 4, below the oversold trigger level of 20, which could foreshadow a correction. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices.

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Inventories Declined More than Expected

Natural gas in storage was 1,943 Bcf as of Friday, February 19, 2021, according to the EIA. This represents a net decrease of 338 Bcf from the previous week. Expectations were for a 278 Bcf draw. Stocks were 298 Bcf less than last year at this time and 161 Bcf below the five-year average of 2,104 Bcf. At 1,943 Bcf, total working gas is within the five-year historical range.

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